Examining Tesla's Competition, Part 3: Gen III Sedan Competitors

Tesla wants to go mass market. But which competitors will be there with them?

While the Model S has been a resounding success for Tesla Motors(NASDAQ:TSLA), the hopes for large future earnings stem from the expectation of the electric-auto maker's expansion into the mass market at a $30,000 to $40,000 range. To do that, Tesla has planned the Gen III sedan. We've already looked at the likely competition for Tesla's Model S and Model X, and here I'll examine some of the Gen III's potential top competitors.

The GermansWhen Tesla CEO Elon Musk singled out the BMW(NASDAQOTH:BAMXF) 3 Series as the car the Gen III would declare war on, he did so for good reason. The 3 Series is a benchmark of the sports sedan in the $30k-$40k price range. Not only will the Gen III be competing with the conventionally powered 3 Series, but BMW has also launched a hybrid 3 Series that gets more than 30 miles per gallon. While that model is still primarily gas-powered, it could pick off some of the buyers just looking for a greener alternative to the standard 3 Series.

But BMW is also launching a plug-in electric vehicle, or PHEV, program to develop new technologies. As I discussed in Part 2 of this series, BMW is looking to develop an X5 SUV PHEV. Although there is no timetable set for that vehicle, BMW already has the i3 PHEV available.

With a three-door hatchback design, 80 to 100 miles of range (an optional gas engine can extend those numbers), and 170 horsepower, the i3 is more of a shorter-range vehicle ideal for those who live in urban areas. In contrast, Tesla aims for a sports sedan more on par with the 3 Series and an all-electric range of around 200 miles. The i3 has its own purpose but shouldn't be considered Tesla's primary competition. However, it will be interesting to see whether BMW can leverage technology from the i3 to build a more powerful all-electric vehicle.

The AmericansOne thing that grabbed attention in the American press recently was General Motors' (NYSE:GM) announcement that it will build an electric car with 200 miles of range selling in the $30k range. Branded as a Cadillac, the car would be designed to take on Tesla and advance GM's position in the EV field.

However, GM hasn't set a timetable for the car, which means we shouldn't expect to see it anytime soon. And it seems that if GM wants to make money on this car -- or even just not lose a lot of money -- the auto giant will need to make some significant technological advancements from here. The current Chevrolet Volt has only 38 miles of all-electric range and starts at around $34,000, and GM still loses a small amount of money on each car.

GM might use this 200-mile EV as a beta testing project similar to the Volt, on which it can lose a little money on each car. However, to make the loss per car reasonable, there's a lot of work to be done between now and whenever this car is released.

For his part, Musk tweeted that he was "happy to hear that GM plans to develop an affordable 200-mile range electric car." He added: "Right target. Hope others do same." So at least for the time being, Musk doesn't appear to scared by GM.

Other competitorsOf course, the vehicles and companies I've mentioned here won't be the only competition for the Gen III sedan. Very capable conventionally powered offerings will come along from Audi, Lexus, and Mercedes-Benz. However, the major automakers aren't indicating that they'll have a vehicle similar to the Gen III in range and price by the time the Gen III hits the market. So it appears Tesla still has room to capture this segment of the market, and it will be critical that Tesla does so. It's what Wall Street expects.

Alexander MacLennan owns shares of Tesla Motors. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool recommends BMW, General Motors, and Tesla Motors and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Alexander MacLennan is a Fool contributor covering Industrials, Airlines, and Financial companies. He is always ready for a good growth or turnaround story and tries to find them before the market does.